Did You Know PLC Is Taxable?

While you were planning to invest in real estate, you would have come across a term called Preferential Location Charges or PLC. These charges give home buyers a choice to opt for a certain view/benefit at an extra cost, and also, help developers maximise their profits. Here are some pointers you should keep in mind:

PLC is taxable

The judgement delivered in June 2016 makes it clear that PLC is taxable. The petitioners in Delhi High Court had alleged that a service tax was being levied on things that are not in relation to the construction. However, a clause has now been introduced which reads as follows, "Taxable Service means any service provided or to be provided to a buyer, by a builder of a residential complex, or a commercial complex, or any other person authorised by such builder, for providing preferential location or development of such complex but does not include services covered under sub-clauses (zzg), (zzq), (zzzh) and in relation to parking place." PLC here means any location having an extra advantage which attracts extra payment over and above the basic sale price. This is, therefore, liable for a full rate of service tax and is without any abatement. 
 
There is no standardisation of PLC

PLC charges may vary from location to location, developer to developer and floor to floor. There are various reasons as to why PLC is sought. In some cities, a higher floor could command a higher PLC. Previously, PLC's were charged for the ground floor to the second floor. Soon, this changed. Now you have PLCs for all sets of homes, whether park-facing, road-facing, or for being open from two sides, or sea-facing, school-facing, east-facing, corner-floor, floor abutting 18, 24, 30 metres, penthouses etc. These days, most developers charge a PLC for almost any floor and any apartment. Their effort is to make every unit likeable and thus, extra charges. It may range between Rs 25-250 per sq ft.

Can there be a discount on PLC?

Well, if there is an inventory overhang or a developer is in a tight position and is just looking to sell, he may discount the rates. However, if you really want to avail such a benefit, try investing early in the project development cycle when the developer wants to ensure quick sales over anything.

Does every project cost you a PLC?

PLC is usually tagged with a luxury project. However, these days PLC has been factored in many projects even in small cities. PLC would be payable at a certain stage of construction and is usually calculated along with the total cost of the house. However, a PLC is not charged if a certain floor or a unit is not seen to be enjoying a special position, basically is not in as much demand as other units.

When can PLC weigh you down?

PLC does make the cost of a property weightier and the with the best developer brands around you, sometimes the amount of money you would be spending could be a burden altogether. In the recent times, a dominant builder firm in Gurgaon was dragged to the Competition Commission of India (CCI) because home buyers felt that it had imposed "arbitrary, unfair and unreasonable conditions". The home buyers were asked to pay the PLC upfront and yet the developer couldn't reserve the unit for the home buyer. The developer's clause was that in case the unit is not reserved, the firm would refund the amount without interest. CCI found this to be unfair. Before investing, home buyers should check for such clauses. These could weigh you down.

Also Read: Purchasing A Property? Look Out For These Hidden Costs